The Jammu and Kashmir High Court has in its ruling in the case of Navneet R. Jhanwar quashed the order rejecting the refund and remitted the matter back to the Authority for fresh consideration, as a reasonable opportunity of being heard was not afforded to the petitioner.
Facts of the case:
- The petitioner, Navneet R. Jhanwar having become entitled to refund of excess tax paid in terms of Section 54 of the Act, submitted a refund claim before the respondent authority in FORM-GST-RFD-06.
- The Respondent instead of directing the refund issued a show-cause notice calling upon the petitioner to show cause as to why his refund claim to the extent of the amount claimed should not be rejected or the amount erroneously refunded should not be recovered for the reason that the claim for refund is belated having been filed after the expiry of two years from the relevant date, as per explanation in Section 54(1) of the Act and that in the instant case the period had expired in April 2020.
- The petitioner replied to the show cause notice and explained the delay. He relied upon notification dated April 3, 2020, and Notification dated June 27, 2020 issued by respondent whereby due to outbreak of coronavirus pandemic, time limit/due date for various compliances has been extended up to August 31, 2020.
- The explanation on delay by the petitioner in light of the aforesaid notifications of respondent No.3 was accepted and accordingly, the application of the petitioner for refund was processed by respondent No.1.
- He, however, without serving further show cause notice upon the petitioner, determined the claim for refund and in terms of the order impugned dated December 2, 2020 rejected the same being not tenable in law.
- It is this order of respondent dated December 2, 2020, which is assailed in this petition primarily on the ground that no opportunity of being heard was ever granted to the petitioner before passing the impugned order.
- The petitioner has invited our attention to Section 54 of the Act and Rule 92 of the CGST Rules, 2017, wherein it is specifically provided that no order rejecting the claim of refund shall be passed unless the person claiming refund is given an opportunity of being heard.
- The counsel of respondents takes a preliminary objection with regard to the maintainability of the petition. He contends that in view of the availability of alternative remedy against the impugned order under Section 107 by way of appeal before the Appellate Authority, this Court ought not to entertain this petition.
Order of J&K High Court: Deliberations and Ruling
The division bench of Justices Sanjay Dhar and Sanjeev Kumar allowed relied upon the judgment of Madras High Court in the case R. Ramadas v. Joint Commissioner of C.Ex., Puducherry, 2021 (44) G.S.T.L. 258 (Mad.) wherein it was observed by the Court as under:-
“7. It is a settled proposition of law that a show cause notice, is the foundation on which the demand is passed and therefore, it should not only be specific and must give full details regarding the proposal to demand, but the demand itself must be in conformity with the proposals made in the show cause notice and should not traverse beyond such proposals.”
The Court also found the Observations of the Madars High Court in paragraph No.11 of
the aforesaid judgment as equally noteworthy and are reproduced the same in its order as under:
“11. The very purpose of the show cause notice issued is to enable the recipient to raise objections, if any, to the proposals made and the concerned Authority are (sick) required to address such objections raised. This is the basis of the fundamental Principles of Natural Justice. In cases where the consequential demand traverses beyond the scope of the show cause notice, it would be deemed that no show cause notice has been given for that particular demand for which a proposal has not been made.
In light of above, the Court allowed the petition and quashed the impugned order and remanded the case back to respondent for passing order afresh after putting the petitioner to proper show cause notice and after affording him a reasonable opportunity of being heard.
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CA. Mohammad Salim is an ICAI award winning Chartered Accountant having rich experience of more than 20 years in the field of indirect taxes. He is the Member, Indirect Taxes Committee of PHD Chamber of Commerce and Industry. He is author of four successful books on GST published by Taxmann Publication and is also GST expert on taxmann portal.
